Client on-boarding: The start of something good

By Nadeem Samaha | 10 March 2015

Client on-boarding can be the first stage of a healthy, productive commercial relationship. Or it can be where it all starts to go wrong. The on-boarding landscape is rapidly evolving and the challenge of getting new customers through the door has become one of vital strategic and regulatory importance. As the FCA continues to increase its expectations around policy areas such as anti-money laundering (AML), Know Your Customer (KYC) and Treating Customers Fairly (TCF), this first step in the new client relationship is seen as the point at which the foundations of a successful and compliant future relationship are laid.

More than a compliance issue

On-boarding is not – or at least shouldn’t be – primarily a compliance exercise. Rather it’s an opportunity to welcome clients, to get to know them, to build loyalty to the brand and to drive sales.

Research has consistently shown the importance of the on-boarding period. In US retail banking, J.D. Power & Associates’ survey of clients has found that customers are three times more likely to leave during the first 90 days of opening a new account, rather than later. Research by the Bank Administration Institute (BAI), meanwhile, has suggested that three-quarters of cross-sales take place in the same period. These figures are repeated, to a greater or lesser extent, over time, across geographies and across financial services sectors.

Unfortunately, many firms’ on-boarding processes are wholly inadequate in the face of these challenges. They can neither ensure a cost-effective, compliant procedure, nor offer a smooth, satisfying client experience that builds loyalty and maximises opportunities. In addition, the on-boarding process is too often too slow, too prone to error, and too opaque for regulators.

Information accuracy

Worryingly, in some banks as many as 60% of applications are incomplete or have errors. Even if they do not make mistakes or leave out relevant sections, frequent changes in regulatory requirements reflected in applications’ design mean that clients may simply be given the wrong version of the form.

At best, these problems are identified and the application must be reworked, often involving repeated requests for information, slowing down the process, wasting clients’ time and damaging the relationship manager’s credibility. At worst, they may slip through, exposing the firm to regulatory action.

These problems are perpetual and cannot simply be addressed by training. Any success in eradicating or reducing errors will only last until the next revision of the form prompted by fresh regulation. Paper-based systems are inherently inflexible, requiring documents to be pulped and replaced with each iteration.

Going digital

Better systems that enable firms to confidently apply rules in a targeted way are likely to be a big part of the answer. By switching to digital, dynamic forms on tablets or computers, and automatic systems in the back office, firms can ensure clients are taken through a consistent, compliant and efficient on-boarding process.

These systems enable clients to be automatically presented with the correct form, and asked only the questions they need to answer based on their circumstances, nationality and other relevant characteristics. They or the client manager will also be prompted to ensure all supporting documentation is collected (perhaps using the tablet’s digital camera, where possible), and the information – once verified as complete – is automatically uploaded into back office systems, eliminating duplication and errors.

Once in the those systems, business process management and case management tools drive the application forward, automating standard checks with internal and external databases, assigning tasks and workflows, and sending out acknowledgements and reminders. Because all the information is digital (since any remaining paperwork is scanned and linked securely to the rest of the application), it is easily stored, searched and retrieved for regulatory audits. Every action and decision is tracked and recorded.

Strategic advantage

Client on-boarding is not just an issue of compliance and avoiding mistakes. Better systems offer the chance to make the most of opportunities presented by the on-boarding process. The time saved filling out information required for compliance purposes can be spent capturing richer, more valuable data at the start of the relationship: recording the client’s disposable income, family situation, plans, risk appetites, investment goals and interests, and prompting, in return, responses and relevant marketing and offers from the firm at the right time.

In this way, the on-boarding process can become an integral part of the client’s lifecycle management, cutting right to the heart of regulators’ objectives and becoming more than just an exercise in compliance.


By Nadeem Samaha, head of capital markets, DST

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